Market Capitalization is the aggregate value of the company on the basis of its current share price and the total number of outstanding shares.
Market capitalization is a critical characteristic that facilitates investors to determine the returns and the risk behind investing in the company’s shares. It helps investors in choosing that stock which meets their risk and diversification criteria.
It is the product of current market price of the company's share and the total outstanding shares of the company.
Market Capitalization = market price of shares * number of outstanding shares
For instance, Company ABC has 2 Crore outstanding shares and the current market price of company’s share is Rs 100, then the Market capitalization of the company ABC is 2,00,00,000 * 100 = Rs 200 Crores.
Market Capitalization is the actual market value of the company. Market Capitalization is used by the investors to rank companies. It is also used in ranking the relative size of stock exchanges like NSE and BSE.
In India, the companies are classified into three categories on the basis of their market capitalization.
Small Cap: Companies with Market Capitalization up to Rs 500 crores are classified as small cap.
Mid Cap: Companies with Market Capitalization between Rs 500 – 7,000 crores are classified as mid cap.
Large Cap: Companies with Market Capitalization between Rs 7,000 – 20,000 crores are classified as large cap.
Mega Cap: Companies with their Market Capitalization above Rs 20,000 crores fall under mega cap.
To know more click here: Indian Market Capitalization